A new effort by the major music labels to distribute their own music online may be in trouble before it even launches. According to reports circulating Thursday, Sony BMG and Vivendi’s Universal Music Group have both received letters of inquiry from the Department of Justice over their planned “Total Music” service. (Early reports suggested the other Big 4 labels (EMI and Warner Music) were also contacted but their spokespeople have apparently denied any involvement).
Not a lot is known about what “Total Music” will entail. The most common theory is that it will be a new breed of music subscription service. By this theory, unlike current equivalents from Napster and Rhapsody, or the now shuttering Yahoo Music Unlimited, “Total Music” won’t directly charge consumers a monthly fee for access. Instead, the service will seek payment from a royalty fee to be built into pricing models at either Internet Service Providers (if such deals can even pass Net Neutrality scrutiny) or, more plausibly, from device makers. An example of this idea in practice would be an MP3 player manufacturer sharing 10% of the player’s sale price with a general fund to be distributed to the labels.
Several other theories speculating about Total Music have also circulated. The only sure thing known is that the effort is part of the labels’ ongoing attempt to try and regain influence over (and more revenue from) the online distribution of their digital content; something thus far they’re struggling with.
Because the Big 4 labels (Sony BMG, Universal, EMI and Warner Music) control around 80% of the global music market, the potential for price fixing or anti-competitive behavior (like refusing to license music to potential competitors) always keeps regulators close by and watchful of monopolistic practices.
In 2001, prior digital sales efforts from the labels were similarly scrutinized for antitrust issues. While neither Press Play (from Universal and Sony) nor Music Net (from EMI, Warner and BMG (before BMG and Sony merged)) caught on with the public, the two music services were probed for 2 years.
Given the limited public information about what Total Music entails, and the fact that Universal and Sony BMG are themselves the two largest of the Big 4, the inquiry now is most likely an effort to seek more information and review whether there is a prospect of collusion or anticompetitive behavior warranting further inspection. It’s likely an investigation to see if there needs to be an investigation.
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